How to Approach an Investor

Taken from The Smart Start Up
http://www.antiventurecapital.com/vc_approach.html

Approaching Investors

How Not to Approach Investors

If you are a marketing specialist looking for a marketing job would you send your resume in response to job postings for high school science teachers or airline pilots? You probably wouldn’t. Just imagine what people would think if you did.

Through this site I receive about ten unsolicited pitches each and every week. One call was from someone two thousand miles away who needed to raise tens of millions of dollars to build an amusement park. The fact that he contacted me demonstrates that he didn’t take any time to read this site beyond the words “venture capital” or find out what my background is.

Using this shotgun strategy to look for investors is a complete waste of everyone’s time. It makes a bad first impression. There is no better way to say, “Hey look at me, I can’t be bothered to do my homework first!” The person on the receiving end will automatically conclude that you 1) have no idea what you are doing and, therefore, 2) are a waste of his or her time.

In the interests of helping you to become more effective in your search for venture capital or angel capital, here are three easy rules to remember.

1. Investing is a local face-to-face game. There are two reasons for this fact. First, investors like to know who they are dealing with. This means that a series of in-person meetings usually has to take place before they start to warm up to the entrepreneur. Second, if something starts going wrong at a company, the investor wants to be able to drive to its office in under an hour for a meeting with the person in charge. Investors do not want to have to drive all day or hop aboard an airplane for an emergency meeting. They have better things to do with their time.

2. Both venture capitalist and angel investors specialize by industry. These are industries in which they have in-depth experience. Once you find a local investor do some further digging through their website or with a quick telephone call to see if they invest in your type of project. If an investor’s focus is on software it makes no sense to contact them about funding for your new fishing lure.

3. Finally, both venture capital firms and angel investors have a preferred deal size. For some venture capital firms the minimum investment size may be $3 million and the maximum may be $10 million. Venture capital firms can also be broken down into early stage and later stage investors with the vast majority being in the latter group. This means they do not invest in startups (recall the Funding Catch-22). For angel investors the minimum may be $50,000 and the maximum may be $200,000. So, it’s really important to find out before you send an executive summary.

In most cases, you can find the answers to all three questions on the venture capital firm’s website. With a private investor you will have to ask him or , better, people who know him before proceeding with your pitch.

The man who contacted me about the amusement park ignored all three rules. He offered a deal an airplane ride away, in an industry I know nothing about, and in a size outside of my range

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